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Consumer Proposal: Become Debt Free

A Legal Path to Debt Reduction and Stress Relief

A Consumer Proposal (applicable in Ontario and all other Canadian provinces) is a formal agreement between you and your creditors. It includes an offer to your creditors to settle your debt for an amount that is less than the total amount owing. This can result in as much as a 70% debt reduction. More importantly, it allows you to keep your assets, your car and your home.

A Consumer Proposal allows you to get out of debt quicker and easier, compared to other debt relief solutions. 

What Is A Consumer Proposal?


Get Out Of Debt Quickly

An example of paying off $ 100,000 in debt through Debt Consolidation vs. a Consumer Proposal:

consumer proposal vs. consolidation loan


With a Consolidation Loan of $100,000 (at 15% interest and monthly payments of $2,000), you would need to pay an additional $157,000 to get out of the same amount of debt. A Consumer Proposal avoids these additional cost: you would only need to pay $30,000 over 60 months to become debt free.


The Advantages of a Consumer Proposal

Depending on your situation, of all your options for debt relief, a Consumer Proposal may be the debt solution that best suits your needs, as it offers you the following advantages:

  • There are no upfront fees. Our initial consultation, in which all of your options are reviewed, is free. When working with other solution providers you are often required to pay a consulting fee upfront, even if you decide to take no action.
  • You have more flexibility in managing your monthly expenses, because the amount you have agreed to pay can be paid out over 5 years.
  • There are no additional payments other than those being offered under your proposal.
  • You generally make one monthly payment to your Proposal Administrator, who disburses the funds to your creditors.
  • Any civil legal actions against you such as a wage garnishment, will be stopped as soon as your proposal is filed.
  • You will stop receiving harassing calls from your creditors, as your Proposal Administrator will handle all future dealings with them.
  • Once accepted, the Consumer Proposal is legally binding on ALL of your creditors. In other types of debt settlement you normally have to negotiate a settlement with each creditor individually.
  • You can be assured of the highest standards of professional behaviour, because you will be working with a Registered Proposal Administrator, regulated by the federal government.
  • You are formally discharged from the balance of your debts owing, once you make the final payment.


Consumer Proposal FAQ: How To Avoid Bankruptcy


The Consumer Proposal Process

If you consider filing a Consumer Proposal, the first step is to meet with a Licensed Insolvency Trustee, who will act as your Proposal Administrator. During an initial free consultation, the Insolvency Trustee will review your financial situation and provide you with details regarding all your available debt relief options. For many people, there are several options available that can provide debt relief.

It is always your decision as to how you wish to proceed.

If you choose to file a Consumer Proposal, the Financial Administrator will determine what a fair offer to your creditors will be, based upon your financial situation. You will then complete all required paperwork and the offer will be sent to all of your unsecured creditors.

Only unsecured debt can be included in a Consumer Proposal. This includes debt such as:

  • Credit card debt
  • Department store card debt
  • Unsecured lines of credit
  • Bank overdraft fees
  • Tax debt
  • Student loan debt (only if you have been out of school for at least seven years)
  • Other unsecured debts


Which Debts Can Be Included In A Consumer Proposal in Ontario?

Debts such as mortgages and automobile loans cannot be included in a Consumer Proposal. In addition, child support payments, spousal support payments, court ordered fines, government overpayments, student loans that are less than seven years old and some other debts cannot be included in a Consumer Proposal either. Your Insolvency Trustee or Proposal Administrator can provide you with these details before you file.

Your Consumer Proposal will include all of your unsecured creditors. Once the offer has been sent, they have 45 days to decide whether or not they wish to accept your proposal. If the majority of your creditors vote to accept your offer, then all of your unsecured creditors are bound by the terms of the proposal.

It is then your responsibility to make the payments that have been agreed to. This usually involves making monthly payments to your Proposal Administrator who will then distribute these to your creditors. There are no additional administrative fees. All fees are taken out of your proposal payments.

Other duties that you will be responsible for under a Consumer Proposal are: keeping your trustee up to date on your address, phone number and employment information as well as attending two financial counselling sessions. In these sessions, you will learn more about money management and budgeting. The goal of these sessions is to put you in a position where you better understand how to handle debt and the steps you can take to rebuild your credit score.

Keep Your Home, Car, and RRSPs

One important aspect of a Consumer Proposal is that you will be able to keep your assets. This is because the consumer proposal process does not typically involve giving up any assets.

Under a Bankruptcy, you may have to give up some of your assets if those assets are not considered exempt. You would also be expected to give up RRSP contributions made in the last 12 months as well as many other investments. With a Consumer Proposal, you get to keep these assets.

As long as you keep your mortgage and automobile loan payments up to date, you are able to keep your home and your car. A mortgage lender cannot foreclose on your property because you have filed a Consumer Proposal. As long as you keep making your payments, a lender cannot change the terms of your mortgage, even if you file a Consumer Proposal.

In most cases, it is usually possible to renew a mortgage under a Consumer Proposal. Again, if you have a good mortgage history and you have kept all of your payments current, you should be able to renew the mortgage with your current lender. Switching mortgage lenders may be more difficult, however.

In general, the fact that you are able to keep your assets when you file a Consumer Proposal is a major reason why many people choose this debt relief process.

Key Details of a Consumer Proposal

Here are a few details about the Consumer Proposal process to keep in mind:

  • A Consumer Proposal is a legal process that is sent to all of your unsecured creditors
  • It allows you to repay a portion of your debts overtime, and have the remaining outstanding debt forgiven
  • A Consumer Proposal can be paid off in between one and five years
  • There are no penaltiesfines, or punishments for paying your proposal early
  • Interest is frozen on your debts when you file
  • You receive legal protection from creditors while under a Consumer Proposal



Who Needs A Consumer Proposal?

consumer proposal best alternatives to bankruptcy

If you are having difficulty meeting your debt repayments (you miss monthly payments or are paying the minimum on your credit cards), a Consumer Proposal may be a far better solution than other options, such as debt consolidation or credit counselling. You will normally end up paying your creditors less than under those options.

In many instances, people find that they continue to make monthly payments, but these only cover the interest owing and do not reduce the principal debt amount. After a number of years they find that they are still heavily in debt, despite their best efforts to make regular payments. By filing a Consumer Proposal in Ontario, you will avoid putting yourself into this position.


Free Debt Relief Consultation

It’s important to remember that every financial situation is different. In order to make the best choice for your financial future, it makes sense to attend a free consultation with a Licensed Insolvency Trustee. This is a person who is licensed and registered to review your financial situation, and provide you with details on the available options to get out of debt. Once you know more about all debt relief options available to you, you can make the right choice for your financial future.

At A. Farber & Partners, we can assist you with eliminating your debt stress, paying creditors, and earning a fresh financial start.

Contact us today by phone (844) 507-7526 or through our contact form for more information or to schedule a free, one-hour, non-binding consultation. We can help you take control of your debt situation and develop a sound plan for becoming debt free.


Read more about Consumer Proposals:


Consumer Proposals in the media

Filing a consumer proposal in Ontario

More than one in eight adult Canadians will declare bankruptcy or negotiate a debt settlement - consumer proposal - with creditors. That’s a lot of people with devastated credit.

The majority of those people will want a mortgage at some point, but they’ll find their options are limited... Read more about How to buy a house when your credit rating’s been trashed

CBC news consumer proposal

Filing for personal bankruptcy in Ontario still carries a powerful stigma in this country. Mere mention of the word conjures up images of deadbeats — irresponsible consumers who couldn't be bothered to get a job or figure out a budget ... Read more about 8 myths of bankruptcy